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A new business relationship

On-demand is a fundamental paradigm shift – not merely on the technology side, but a paradigm shift to the entire business. It transforms your role as a supplier, from being a provider of software or technology, to being a provider of business solutions. And it completely revolutionizes the relationship between supplier and customer.

At SAP, our on-demand portfolio consists of 3 solution offerings:

  • Business ByDesign: the integrated suite, with everything you need to run a business;
  • Line of Business Solutions: designed to increase the effectiveness of a particular line of business; examples of products available today are Sourcing OnDemand and Carbon Impact. Soon to come are Sales OnDemand and Travel OnDemand; 
  • Personal Productivity: solutions intended to enhance your personal productivity; available today are Business Intelligence OnDemand and StreamWork.

While I am managing SAP’s portfolio of on-demand solutions for lines of business, my comments apply to all on-demand solutions.

So, what makes on-demand and its fancily termed counterparts, Software as a Service, Platform as a Service, Infrastructure as a Service, such a radical departure from the status quo? Why do I refer to it as a ‘paradigm shift’ and not (just) a new technology? Why and how are we experiencing such a profound shift in the nature of the relationship between solution provider and customer?

The supplier now takes end-to-end responsibility for successful usage of the solution. In an on-premise world, it was the customer who bore the ultimate responsibility for successful usage.  In today’s world, this responsibility sits squarely on the supplier’s shoulders. The buck stops here. SAP ensures the successful usage of a solution by:

  • Providing complete solutions: software + content + business solutions, as opposed to piecemeal software where the customer is left to fit together all piece of the puzzle. Together with our eco system of partners, we are at hand to help every step of the way, from configuration to content transfer. 
  • Deploying, maintaining and delivering solutions all the way through consumption
  • Delivering continuous business relevance through seamless upgrades.

The benefits to a customer are exponential:

  • Rapid time-to-value results in greater business agility,
  • Considerable reduction in cost/ risk for IT initiatives, and
  • Customers remain current thanks to embedded best practices.

Well, this sounds like a perfect win-win for both customer and supplier.  What’s the catch?  In reality, this new business model brings new challenges for the solution provider. The provider now bears additional costs, carries additional risk, needs to adjust to a significant culture change while going from vendor to solution provider, and must grapple with completely new economics.  In the final analysis, is this a favorable situation for the solution provider?  What’s in it for us? 

Our philosophy is to greet this opportunity with open arms, and to give it everything we have, and them some more. We passionately believe that this model is fundamentally healthier for us as an organization in the long run, and will result in creating a much stronger business relationship with our customers. A stronger business relationship between solution provider and customer stems from some powerful features of this system:

  • Both parties share value at the same time. In the traditional (perpetual license) model, the solution provider saw all its value up front, but the customer only realized value over time, based on usage. The new system is a subscription based, pay as you go model and we both share value simultaneously.
  • Disintermediation: Line of Business Solutions give the actual business division tremendous freedom and flexibility when it comes to procuring solutions for their business requirements. They are no longer required to wait for IT approvals or depend on IT budgets and priorities. The process for purchasing a business solution is as simple as the swipe of a credit card. The new process eases IT’s backlog, and directly links the end user to the provider.  Disintermediation leads to a much healthier relationship.
  • Customers now work in close partnership with solution providers to create product enhancements. Sophisticated feedback mechanisms have been built directly into the system, and the supplier is able to track customer usage in real time.  Insights into product usage are now direct and immediate, and the information is used to constantly enhance the system. 
  • Product is upgraded seamlessly, and the product enhancements reach the end-users every 3 – 6 months as opposed to every 3 – 6 years with the older system! (stay tuned for more details, I plan to deep dive into this arena in my next blog…)

We are embarking on an exciting and transformational journey from software vendor to complete solution provider and business partner. Some changes will be simple, others complex, but the final destination is a profound change in who we are, what we do, and the relationship we share with our customers.

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